Hello, welcome to the Bureau Veritas H1 2024 Results presentation. My name is Caroline, and I'll be your coordinator for today's event. Please note, this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you'll have an opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero, and you'll be connected to an operator. Today's call, we have Hinda Gharbi, the CEO, and François Chabas, CFO and Executive VP. I will now hand over to your host to begin today's conference. Thank you.
Thank you, Caroline. Good afternoon, and good evening to everyone. Thank you for joining Bureau Veritas today on the webcast and on the call. François Chabas, our Group CFO, is here with me to present our first half 2024 results and answer your questions. In the first half of the year, Bureau Veritas continued to deliver on its commitments with a strong performance for top line margins, earnings per share, and cash. This is fully in line with our LEAP | 28 strategy goals and shows the excellent execution pedigree of our company. I take this opportunity to warmly thank our colleagues around the world for all their contributions. Starting with the financial highlights for this record first half, revenue reached EUR 3 billion, with an organic growth of 9.2% and was 9.3% at constant currency.
This performance demonstrates the excellent execution of our business plan. In the second quarter, we delivered double-digit organic growth of 10.4%. Growth was driven by high volumes and pricing. On a reported basis, growth was at 4%. Adjusted operating profit increased by 4.1% year-on-year to EUR 451.9 million, generating a margin of 15%, up 33 basis points at constant currency. Our adjusted net EPS is up 4.5% to EUR 0.64 and is up 6% at constant currency. Free cash flow totaled EUR 189.9 million, up 44% year-on-year, reflecting our disciplined capital allocation and demonstrating our rigorous working capital management. Strong performance in H1, coupled with a healthy backlog, allow us to revise upwards our revenue growth outlook for this year.
In terms of mix, all business lines and regions delivered a strong performance, with high growth from sustainability services and energy transition projects. Specifically, Marine & Offshore, Industry, and Certification continued their strong growth momentum, up high double digits organically, in line with previous quarters. The Consumer Products business continued its recovery with an organic growth of 7.3% in H1, driven mainly by an increase in new product launches. Buildings & Infrastructure and Agri-Food & Commodities achieved solid mid-single-digit organic revenue performance. From a geographical perspective, all regions performed well, with the fastest growth recorded in the Middle East and Africa. Turning now to our CSR commitments. We continue to deploy our new CSR plan and start the execution of its different associated programs to meet our new LEAP | 28 strategy targets.
In June 2024, for the first time, we presented the group's climate strategy at our annual general shareholders meeting. It defines our decarbonization priorities and objectives. These objectives have been approved by the Science-Based Targets initiative for our near-term targets. In this first half of the year, our CSR indicators progressed mostly in line with our plans and are supported by well-defined and granular programs at all levels of the organization. I'm pleased to also report that our performance is recognized by a number of non-financial rating agencies. I would like now to share with you the key events of this first half. We have started the execution of our LEAP | 28 strategy, which was launched at the end of Q1. We have completed our EUR 200 million share buyback program that we announced in March 2024 and executed it in two steps.
Additionally, in May, we benefited from favorable market conditions and issued a EUR 500 million bond. This follows the assignment by Moody's of our first long-term A3 credit rating with a stable outlook. I will now give you an update on our strategy progress. Our LEAP | 28 strategy intends to make a step change in growth and performance and is built around three pillars: a focused portfolio, a performance-led execution, and an evolved people model. I'm going to cover today the progress of the first two pillars. First, we are actively managing our portfolio, and we have acquired four companies to create new strongholds. As a reminder, the new strongholds are markets of high growth, where we are accelerating our development and scaling to reach a top three market position.
In cybersecurity, this month, we signed an agreement to acquire Security Innovation, a U.S.-based innovator, specialized in software security services, focused on software testing, secure software development, lifecycle advisory, and training. It realized the revenues of EUR 21 million in 2023. In Consumer technology testing, we have signed definitive agreements to acquire three players in Asia. They will extend our position in testing and certification services for the electrical and electronics Consumer products in the leading R&D market of South Korea. We're also building a new position in the growing technology manufacturing hub of India. The acquired company's revenue was a combined EUR 20 million in 2023. Generally, we continue to develop our pipeline of opportunities, and we expect M&A to play a key role in Bureau Veritas' growth strategy.
Second, we are working to extend leadership in our existing strongholds in B&I, and in line with our goals for this market-leading business, our strategy is to expand geographically in new critical countries and to fill in gaps in our portfolio. The intention is to ensure a comprehensive range of offerings for our customers and to adapt to an evolving market. Then, this will be done both organically and through M&A. The effect of portfolio management is unfolding in the following manner: First, we have identified specific M&A targets, and we expect to announce some acquisitions before year-end. Second, we are actively working on improving our mix. We recognize that market conditions have changed for the construction market in China, and we are taking action to reposition the portfolio. We have just signed an agreement for the divestment of a non-strategic construction supervision business there.
This business represented less than EUR 30 million in annualized revenue. Effective portfolio management, we believe, will support our results going forward in B&I. Turning to performance, the second pillar of our strategy. Our aim is to consistently improve our margins through performance programs designed to deliver meaningful efficiency and productivity benefits. One of the two performance streams is operational leverage. This encompasses the performance management central to our efforts to improve profitability across the group, but particularly in those areas where we are not satisfied with the current margin. When it comes to process improvements, there are a number of programs intending to modernize our operational systems and to reengineer our processes. Let me share with you two such projects. In our Certification business line, we are developing a new production system that improves efficiency and streamlines processes.
We are currently piloting the first phase in key geographies, and the solution will be deployed by year-end globally. In Marine & Offshore, we have launched our operational platform, Move, a collaboration hub that groups all applications, including a smart asset management solution. Successful pilots have been completed with ship owners. We expect to deploy this solution widely in half two. I now hand over to François for the financial review.
Thank you, Hinda. Good afternoon to everyone. So on the key financial achievements of the first semester, organic growth, first, remains very strong at 9.2%. It showcased Bureau Veritas' ability to deliver a broad-based growth that we will see across most of these operations. On the profitability front, we delivered a margin of 15%, up year-on-year, 33 basis points at constant currency. On the bottom line, our adjusted earnings per share increased by 4.5%, driven by the company's solid operating and financial execution. When adjusted from currency effect, the increase in adjusted EPS was even more substantial, reaching +16.3%.
Lastly, when it comes to the financial structure of the company, our financial leverage, our net debt to EBITDA ratio was maintained at a low level of 1.06 times at the end of June 2024. Starting on the revenue front, revenue bridge, we delivered above EUR 3 billion in the semester with a strong organic growth of 9.2%. This is the 8th quarter of organic revenue growth, at or above 8% over the last 10 quarters. Acquisition added 0.1 on a net scope basis. It reflects the impact of bolt-on acquisitions realized in the past few quarters, and some offset by the disposal of our non-core automotive inspection business in the U.S. last year in July. As presented in our capital market day, we will continue to actively manage our portfolio in the coming quarters.
Forex, in fact, represent a drag of 5.3%, leading to a total growth of 4% on a net reported basis. This is mainly attributed to the strength of the euro versus several emerging market currencies. From H2 onwards, we expect easing negative impact due to easier comparables on several of such currencies. When it comes to the performance of the different businesses in the first half, including Q2, so what you can see on the, on the slide, that all businesses deliver good growth, and I would say relatively a regular growth between Q1 and H1. You see not, not many differences. Three activities led the growth: Marine & Offshore, Industry, and Certification, all delivered double-digit growth in H1 and in Q2, on the back of continued momentum in sustainability services, including decarbonization for Marine & Offshore, renewable energy for Industry, and certification scheme for Certification.
& Commodities and B&I both delivered mid-single-digit organic revenue growth in the semester. B&I was led by both in-service and new build activity, and improved sequentially in Q2, up 4.9%. Agri-Food & Commodities growth was driven in particular by the strong demand for agri-food and oil and petrochemical, and grew 6% in the quarter. Finally, we are pleased to report that the recovery of the Consumer Products has been achieved. 8% growth in the second quarter, which led to a 7.3% growth performance in the first half altogether. Now, on the margin bridge on this page, organically, we improved margin by 29 basis points to 15.3. Scope had a slightly positive impact of roughly 4 basis points....
And then as a consequence, at constant currency, we delivered a 33 basis points improvement year-on-year. This is fully aligned with our commitment to deliver consistent margin improvement at constant currency. Forex was a drag of 33 bips to the gross margin due to the strength of the euro. So on a reported basis, we delivered a stable margin of 15% in the semester. Within the portfolio, the revenue growth and operating leverage drove organic margins higher in Marine & Offshore, up 88 basis points, in Certification, up 150 basis points, and in Consumer Products, up 134 basis points organically.
In addition, we are forced to be more commercially selective by focusing on profitable contracts in Industry, have continued to bear fruit, and as you see on the page, the organic improvement is 92 basis points to reach 12.7% on the H1 basis. Elsewhere, our Agri-Food & Commodities margin declined by 90 basis points organically. It reflects a negative mix from the metals and minerals segment. B&I margin eroded by 53 basis points organically, reflecting a strong recovery of the U.S. operations on the one hand, but not fully compensating the soft performance in China. Overall, we've managed to keep the margin at 15% in the first half, despite the forex exchange impact that we've just discussed about. Moving now to other financial metrics in the half year, EPS, cash, and the balance sheet.
Starting with the bottom line elements, our net financial expenses slightly increased compared to last year, to EUR 25.6 million. While our cost of debt remain stable, we recorded higher unfavorable exchange rate effects compared to the previous year. On the income tax front, our adjusted effective tax rate was reduced by 1.7 percentage points compared to the first half of 2023. The decrease is mainly due to a reduction in the amount of withholding taxes incurred over the period. For the full year, we expect the adjusted ETR to be in the range of 30%-31%. On the next slide, we see the growth of earnings per share. We delivered a solid adjusted EPS of EUR 0.64, up 4.5% year-on-year. Solid operating performance, but also lower tax rate, as we've just seen.
At constant currency, the increase is 16.3%, demonstrating our commitment to deliver a double-digit shareholder return based on dividend, dividend yields and EPS CAGR over the period at constant currency. So we remain overall confident to maintain a positive EPS momentum moving forward. Moving to the cash flow statement, free cash continues to be very strong and is up 44% year-over-year to almost EUR 190 million. Despite the strong revenue performance in the, in the second quarter, as we've just seen, our working capital requirement outflow was kept under control at EUR 168 million, compared to EUR 196 million outflow the previous year.
Our working capital level at 9% of revenue is a good achievement, given the strong level of activity in H1, and we are expecting the usual seasonality when it comes to H2 in terms of working capital reduction. On the investment front, CapEx. So, we see that we decreased the CapEx level to 2% of the revenue. Two reasons: first, most of the growth, as you've seen, is driven by asset-light businesses within the portfolio. And second, we have some kind of a seasonality, so we'll catch up in H2 on some project that will be delivered in H2 in terms of investment. So we expect this overall to be in the range of 2.5%-3% for the full year 2024. As a conclusion, we close H1 with a very robust financial structure.
Our net debt stood at approximately EUR 1 billion at the end of June. We have completed our EUR 200 million share buyback program that we announced in March. It's been executed in two steps. First, the acquisition of EUR 100 million, which is roughly 0.8% of the group's own share in April, under the Wendel Group Placement. The remaining EUR 100 million was purchased direct from the market throughout the rest of the quarter, so the operation has been completed by mid-June in its totality. Following this operation, the leverage ratio remained at a low level of 1.1 times. This demonstrates the strength and resilience of Bureau Veritas' balance sheet. The company has no major refinancing requirement before 2026, and 100% of its debt is at fixed interest rate.
Regarding the EUR 500 million euro bond issued in, which is due in January 2025, it has been already refinanced, as mentioned by Hinda in introduction, through our successful EUR 500 million debt issuance completed in May. So in summary, Veritas delivered, once again, another set of strong financial results in H1, and I would like to thank all the team across the organization for their commitment in achieving this performance quarter after quarter. So I now hand over to Hinda to provide you with more in-depth business review.
Thank you, François. Let me share with you the highlights of the first half for each of our six businesses. Another strong performance in Marine and Offshore, of course, with a 14.7% organic progression. We continue to benefit from a multi-year growth momentum as the maritime industry decarbonizes, renews its fleet, and becomes more energy efficient. We have secured 7.4 million gross ton in sales in H1, bringing our backlog to 26 million gross ton, up 27.5 year-on-year. This is driven by LNG fuel ships and specialized vessels, and gives us good visibility on future ship construction activity. Pleased also to report that growth was achieved in all sub-segments. We grew a strong double-digit in the new construction activity, continuing the acceleration we've seen in the first quarter into the second one.
We grew double-digit in the core in-service business. This is driven by, of course, the increased number of class vessels, disciplined pricing, and by addressing contract leakages. Looking ahead, we expect that shipyards capacity will be fully utilized, slowing down the conversion of the backlog. When it comes to innovation, we have issued an approval in principle to China Ship Design and Research Center for its latest ammonia fuel chemical tanker design. This project is one of the key ones to address increasingly stringent environmental standards. Our Agri, Food and Commodities division delivered a 4.6% organic revenue growth, with different dynamics amongst the sub-segments. Oil and petrochemical-- chemicals recorded high single-digit growth. It benefited from strong business development with key accounts in critical markets. We also maintained a strong momentum in Europe with market share gains.
Following a stable performance in Q1, the metals and minerals segment recovered in the second quarter with low single-digit organic growth. We continue to execute our on-site laboratory development strategy, where we are growing double digits in the first half. Trade activities showed also a good traction, especially in China and India. Agri-Food achieved high single-digit organic progression. The agri sub-segment was boosted by growth in both upstream and trade activities. The Americas benefited from excellent crop yields, offsetting the impact from floods in Brazil. The food business growth was led by the sustained recovery of Australia activities and good traction throughout Asia. On government services, unfavorable comparables and contract cycle resulted in a stable year-on-year organic growth. We are continuing, of course, our sales efforts with promising new opportunities.
Looking now at Industry, the organic growth was 17.5% during the first half, and was broad-based across most sub-segments and geographies. Customer spending remains strong in all energy sectors, driven by energy security and transition needs. Overall, all industrial sectors show a good growth momentum. Looking by sub-segments, the activity in oil and gas remained buoyant, with a double-digit organic growth in H1. Both CapEx and OpEx services increased substantially as we benefit from a favorable investment cycle and leveraging our recognized expertise and global capabilities. In power and utilities, growth was stable, considering contracts arbitrage executed last year compared to last year. Renewables within P&U recorded strong double-digit organic performance in most geographies. The growth was led by the US, where we expanded with new solar projects. We continue to see sustained investment in renewables in China, driving our growth there.
In the second quarter, Bureau Veritas was awarded contracts to work on renewable energy projects that, when completed, will amount to an installed capacity of 35 gigawatts and produce 96 terawatt-hours of renewable energy annually. The industry product certification sub-segment continues to grow double-digit organically in line with previous quarters. On the sustainability front in Industry, we have secured a Green Object Contract in California, delivering project management services for the decommissioning of wind turbine generators and the installation of new ones. We have also secured a contract for a large rail manufacturer as a third party to evaluate two hydrogen locomotive projects. Now, looking at B&I. We achieved an organic growth of 4.3% in H1, including 4.9% in the second quarter. We are recording sequential organic growth since the beginning of the year.
During the period, CapEx the CapEx business grew faster than the OpEx activities, primarily led by the infrastructure projects. Geographically, in the Americas, we delivered a solid performance in Q2, lifting H1 results. The U.S. platform delivered mid-single-digit organic revenue growth, capitalizing on its diversified portfolio of activities. Among the best performance, the data center commissioning business continues to perform very well, driven by the buildup of data centers to respond to needs from cloud computing and AI development. Double-digit growth was achieved also in both OpEx-related services and CapEx infrastructure business. Growth in Europe was robust in H1, driven by most countries. France continues to grow through its CapEx-related activities from infrastructure and public works. Double-digit growth was achieved in Asia Pacific, Middle East and Africa, led by India, Australia and Saudi Arabia. China had a stable performance, driven by energy-related construction activity.
Weak public spending, however, is still constraining market growth in transport infrastructure there. We continue to develop sustainability solutions for buildings. In the first half, we signed an exclusive contract with the French National Housing Agency. Services will cover energy performance and efficiency checks on project finance under the French Energy Management Subsidy scheme. We were also selected for a multi-year program by the California Olympic Committee to provide project management services for the rollout of electric vehicle fast charging stations. On the certification front, the business continues to deliver a strong performance over the first half of 2024, recording a 16% growth on an organic basis. This performance was led by strong volumes and robust price increases. This year's recertification cycle enabled a double-digit organic revenue performance in QHSE solutions.
In Europe, growth was achieved thanks to Bureau Veritas' leading market position, new contracts, and broad set of services. The certification business benefits from a dynamic of innovation to develop customized and voluntary schemes for customers as they address their consumers' needs. As an example, Bureau Veritas recently delivered the Origine France Garantie label to two car models produced by the French car manufacturer, Renault, making them the first full electric vehicles to obtain this certification. Sustainability-related solutions and digital certification activities, representing a third of our divisional revenue, grew a strong double-digit organically. They benefited from an excellent momentum around carbon services, forest-related services, food sustainability, and cybersecurity assurance. During the first half, Bureau Veritas continued to grow its assurance of sustainability reporting activities. In France, as an example, we helped an IT services provider to comply with its CSRD reporting.
We were also awarded a contract by a global dairy product company to carry out ethical trade and responsible sourcing audits in 125 sites in Mexico. Finally, for Consumer Product services, we delivered a 7.3% organic revenue performance in H1, with a growth of 8.3% in the second quarter, confirming recent improving trends. By geography, Asia showed good improvement, led by China and Southeast and South Asian countries. Our diversification strategy is paying off as our Americas operations benefited from the growth from businesses acquired in the last two years. Looking by subsegments, Softlines, Hardlines, and toys delivered a double-digit organic growth, driven by volumes recovery from destocking. The hardline business was particularly strong, with a notable increase in SKUs. Our healthcare subsegment, including beauty and household products, delivered double-digit organic growth in H1.
Recent acquisitions in North America are driving growth through synergies on global accounts, improving prices, and expanded scope of services. For supply chain and sustainability services, we delivered a strong double-digit performance, led by CSR audits and transition services. This is due to high demand from customers around social audits and green claim verification. Technology contracted in the first half. It is still affected by low demand for electronics, wireless products, and electric vehicles equipment. Electrical appliances performed well, however, and benefited from improved Consumer spending. Looking at sustainability achievements in Consumer Products, in the first half, we secured a contract with a large DIY company in Portugal to help guide their suppliers to obtain sustainable claims certification services. We also secured contracts with two major luxury groups to test their products for chemicals over and above regulatory requirements.
Looking now at the outlook, I'd like to share our upgraded outlook. We now expect to deliver for full year 2024, high single-digit organic revenue growth. This is to compare to mid- to high single-digit previously. This reflects our strong half one and our confidence in our business execution in the second half. An improvement in adjusted operating margin at constant currency, strong cash flow with a cash conversion above 90%. We expect half two organic revenue growth to be broadly similar to half one. Before getting to questions with François, I would like to close by saying, first, customer proximity and strong operational execution, coupled with a strong backlog, allowed us to outperform in this first half of the year.
Second, following our LEAP | 28 strategy launch, we have embarked on a globally orchestrated execution plan, and we are monitoring closely the progress of our different strategic streams. Finally, we continue to monitor market developments and believe that the key secular trends supporting our strategy are robust, confirming our assumptions. We are confident in the strength of our LEAP | 28 strategy and will continue to report on our progress over the coming quarters. Thank you all for your attention. François and I are now ready to take your questions on the call or on the webcast.
Sure. Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the first question from line, Annelies Vermeulen from Morgan Stanley. The line is open now. Please go ahead.
Since upgrade, you know, clearly there's operational leverage in this business, as organic-
Annelies, Annelies, we lost a big chunk of your question there. If you could please repeat. We didn't hear that.
Okay. Can you hear me?
Yes.
Yeah.
Yes, go ahead, please.
Okay. Hi. All right. Sorry about that. So, I wanted to ask about the guidance upgrade. So, you know, given you've got operational leverage in the business from higher organic growth, I'm just wondering why there's been no sort of change to your margin guidance, specifically? And you know, you've also talked about the initiatives into year-end to increase the operational leverage. So, you know, was there any reason for keeping that margin guidance unchanged at this stage? And if you could also perhaps quantify what you know exactly how much you mean by an improvement in the margin. Is that 10, 20, 50 basis points? That's the first one.
And then secondly, just on Buildings and Infrastructure, you know, as you say, the growth has sequentially improved, despite, I think, the fact you had a tougher comp in the second quarter. Is it fair to say that we, you know, you think you've passed the worst of the growth in this business, and that should continue to improve from here based on your pipeline and your conversations with customers? Thank you.
Thank you, Annelies, thanks for the question. Look, on the first question there, we have maintained our guidance on the margin. We are very clear that we will deliver improvement at constant currency. And the reason we are doing that, because while we generate improvements, we also have to invest to enable these performance programs. And we consider at this time that we are committing to the improvements, but we have to enable them. And therefore, at this point, this is still reasonable guidance for us to allow us to progress on our programs. I'll let François take the second question on the quantification.
Yes, good afternoon, Annelies. On the quantification, you know, we try to do things in a simple manner for you guys as well, meaning delivering on a regular basis based on what we said before. So, no change compared to the Capital Markets Day. We are making efficiency gains. We reinvest a bit, as indicated by Hinda, into the operations for a reason, not just for spending, but to make sure that this is a continued performance. So you can keep the same, you know, ideas and numbers as the ones you got on the Capital Markets Day. We say it has to be a continuous improvement in terms of margins sequentially, 10, 20, 25, you know, around that basket, it hasn't changed.
Yeah, thanks. Thanks, François. And on the third question, the short answer is yes, we expect ourselves to see B&I improving. But it's important to mention that we have been actually improving since the trough of Q3 last year. And we are executing our strategy on B&I to ensure that we expand both geographically and in services. And that's allowing us to address some of the softness, for example, in China. That platform we are working on shaping that. We continue our plans to diversify our services in the U.S., and that's provided resilience so far. And of course, our European platform is critical to B&I, and there as well we are working on organic developments as well as expansion of services.
Understood. Just as a follow-up to that, so in B&I, it sounds like it's a combination of your own initiatives and your positioning of the portfolio and services, et cetera, as well as sort of stability or slight improvement in some of the end markets. Is that fair?
Yeah, I think it's fair to say that structurally, the B&I market is still buoyant. And, you know, the urbanization we talked about is happening. Infrastructure spend is increasing. In fact, as I mentioned, the infrastructure was leading the growth on the CapEx side. And the OpEx is resilient by nature anyway, so there is no change for us in terms of market dynamics in that front.
Perfect. Thank you very much.
Thank you, Annelies.
Thank you. We will take the next question from line, Sylvia from J Morgan. The line is open now, please go ahead.
Hi, good afternoon.
Hi.
Two questions, please. Firstly, on the second half guidance on organic growth, could you maybe discuss the shape of that growth? Will we finally see any slowdown in Marine, or is that continuing to grow very strongly? Or indeed, you know, any other divisional comments will be helpful. Secondly, now that you've had some time to look at positions in the space, could you maybe talk a little bit about the pipeline? I guess from the outside, it looks like making smaller acquisitions is possible at very attractive prices. And you, you've clearly had an acceleration in that momentum, but anything bigger, possibly still PE territory and maybe a little bit more expensive. Maybe can you comment around that as well?
And then finally, as always, could you just comment on the price versus volume in H1 and then into the second half? Thank you.
All right. Thank you for the questions. Look, I think the Marine. First of all, of course, you know, we don't guide specifically by each one for second half, but just a word on Marine. Marine is going through what I would call a super cycle here, because there is what is structural around the Marine market is, it's not just there is a demand for a certain number of ships, and that will end very quickly. This is a profound transformation of the shipping industry because there is a need to decarbonize, and the timeline for that is very, very close. So the renewal of the fleet is real. It is taking place, and it will continue to progress that way.
It's not reversible, if you will, because you have to decarbonize your fleet, and there is so much you can do in improving a bit of the performance. The decarbonization is structurally requiring new ships, new types of propulsion. Having said all that, it means that there is really momentum to build these ships. And we are, you can see it in our sales, and our sales have improved 27.5%. Our accumulated sales wins accumulated 27.5% year-on-year. That is really a direct translation of that. Now, the reality, though, is to convert those wins into actual construction, you need to have access to shipyards.
The shipyards today are busy, and in fact, the capacity is full until end of 2026. So we are gradually converting our wins, but at some point, we're gonna run out of shipyard capacity. And that's really the cautious, you know, the caution sometimes we have around Marine and Offshore, because we don't control the dynamic of the shipyards, right? And so we still could think that M&O generally would have a robust performance this year. In the coming years, it all depends on shipyard capacity. In terms of pipeline of M&A, you're absolutely right. We are growing our pipeline. And in fact, if you look from December to now, we have completed 6 transactions to the tune of circa between EUR 16 million and EUR 17 million.
So we are progressing, and we're building our pipeline. It's an effort orchestrated globally, coming from our regions, coming centrally from our business lines, and we continue to work on that. What is very clear is that the criteria with which we're looking at this pipeline are very well defined for our teams. It's about strategic fit, and it's about the parameters in terms of performance of these businesses, and of course, the parameters in terms of what we are prepared to pay for these targets. So that effort is progressing. I don't think we will ever pursue something just because it's big. We will pursue a target because it meets a strategic fit.
And then we will adjust, of course, depending on the scale of that particular target, and see what we can do there. So, as I mentioned, we have a number of deals in the pipeline that we should be able to announce from now until year end. I'll let François comment on the price volume. Go ahead.
Yeah. Well, Sylvia, on the price volume mix, you know, from an economic point of view at the end of H1, we could say that the growth is first and foremost volume driven, represent two thirds of the growth, and one third would be price driven. Looking ahead, in it over H2, we don't expect this to change materially. I think we pay a lot of attention to ensure that the pricing discipline, which has been perhaps reinstalled in some of our regions, over the last two years, is maintained, especially at a time where, in some geographies and in many thinking of U.S. and Europe, the inflation pressure is kind of coming down. I think we are very strict with our team when it comes to pricing mechanism and how they are so reapplied.
So that's one element of focus. But as well, I think, there is a very, very strong momentum in terms of gaining market share, gaining new clients, getting new brands, because ultimately that's the way you develop a company. So two-thirds volume, one-third price, and we don't expect this to change materially over H2.
Thank you very much.
Thank you, Sylvia.
Thank you. We will take the next question from the line, Suhasini Varanasi from Goldman Sachs. The line is open now. Please go ahead.
Hi, good evening. Thank you for taking my questions. Three from me, please. Can you perhaps discuss trends in energy transition and green projects in the U.S.? Clearly, it's seen very strong double-digit growth in the first half. But given elections this year, are you seeing any hesitation around launched new projects, please? The second question is around the B&I in China, which has been a bit weak. I think I heard you mention a divestment of about EUR 30 million revenues. What were the margins here, and what benefit will it have on margins once this disposal is done? The third question is on FX impact on EBIT margins. It's been about 30 basis points in first half, but given current spot rates, how should we think about second half FX impact, please? Thank you.
Sure. Thank you, Suhasini. Good to hear you. Look, I think the, you know, if we step back, there is, you know, a commitment made, recently and last year in particular, where 130 countries committed to triple the renewable capacity. And so that, that is driving many countries' policies around that, and the U.S. is, is one of them. Of course, there is, large expectation that the U.S. will spend a few EUR 100 billion on, on that. So for us, what we see today, and we are very active on the solar side, in the U.S., also on wind, but solar is, is really taking off. There is, a real momentum around that.
We haven't seen fully the impact of the IRA, but we haven't seen a delay in projects in general when it comes to solar. Our business there in the U.S., and we have this acquisition, Bradley Construction, that we acquired a few years ago, has been ramping up, but we see really a pipeline of projects there. So, at this point, the elections haven't, didn't yet impact the projects we are working on or the pipeline we are considering in terms of opportunities. Of course, there is, you know, everyone is watching what the new administration, whichever one it ends up to be, will do. But at this time, this is not a concern yet. On B&I China, François, you want to comment on that?
Yeah. So Suhasini, on B&I China, I think we need to put that back into context. First context is the one of the Capital Market Day, where we indicated clearly we were revisiting some of the portfolio we have, and you know, assessing the value of each asset based on certain number of parameters. And obviously, this activity was not meeting the threshold, neither in terms of trading growth or current trading growth or growth potential, neither in terms of margin. So the activity is dilutive to the B&I segment, without question. So for sure, having this activity exiting the portfolio, that will drive mechanical improvements in the margin of the division. I don't, you know, we don't guide much further, but this will have a relative impact.
And again, we believe that some segment of the Chinese market, even though we are not exposed to the direct real estate companies, is softening. I think the trajectory of the group has been laid very clear by Hinda, that the type of growth we are looking for is way above what at least this asset could provide to us in the near term future. On FX impact, so you know, this is my favorite subject, especially when it comes to predict the future of 90 currencies in 140 countries. But to make it short, so from what we see from, you know, we are running several very detailed model in terms of current spot rate, exchange rate, and forwards.
So I think currently, I'm a bit careful, but we are relatively confident that we are in for a softening in H2 of the negative impact, so an improvement in that case, especially due to the Australian currency, the Chinese renminbi, which are both of them, you know, reaching their level of summer last year. So we will be making quite a change considering our size in Australia and in China. The impact on margin, I think we are pretty much looking to reduce the 33 basis points you see in H1. At that stage, I have Lauren looking at me saying I can't say much more, so it will be better.
Of course, no, thank you very much.
All right. Thank you, Suhasini.
We will take the next question from the line, Rory McKenzie from UBS. The line is open now, please go ahead.
Good evening, it's Rory here. Two questions, please.
Hi, Rory.
The first question is on your group headcount. Can you say how that's changed at the end of H1 from, I think, I think from the 81,000 you had at end December? And then the second question is diving into the margin improvement in Consumer in a bit more detail, where I think you saw about a 40% organic drop-through rate in H1. Can you talk about the level of spare capacity or underutilized capacity that you have in that business today, and what you're seeing in terms of any customer trends over the summer so far? Thank you.
Yeah, look, on the Consumer side, you know, last year, considering the activity and the difficulties we had last year, we worked on a number of restructuring and consolidation of labs. And this year, our results in the first half, we've seen a recovery on the Soft line, Hard line, and healthcare side, while the technology continued to contract. So the impact of that restructuring and all the cost management programs resulted in this improvement of margins. Now, in terms of market, two things.
If you look at half one this year, we have seen the first quarter, and I mentioned that earlier this year, we had an early Chinese New Year, which is always important because it allows the production to proceed earlier in the year. It doesn't get pushed down to Q2, and then to later on in the first half. And we also have seen a restart of product launches. Or in general, we have seen the impact of destocking on production in the producing markets. I mentioned earlier that we have seen a pickup in China, we've seen a pickup in Southeast Asia, we've seen a pickup in South Asia. That's mostly on the soft line.
Hard line has performed very, very well as well. And then the healthcare, it's really a direct, the, all the business we have around, healthcare, personal care and household products, there it's we are executing, executing our integration plan, which allowed us to, to capture, in a way, a very strong growth. Mostly because we are expanding on different global accounts, we are able to offer a more comprehensive services to customers. So this is a dynamic that is not a surprise for us, because we have been working on our diversification strategy, and we were able to see the impact.
So the healthcare grew a high double digits, actually, in this quarter, in this first half, and double digits was seen on the Soft line, Hard line. So my point here is this is not a complete surprise in the sense that we have started our diversification strategy for a while for CPS, and it's paying off. It's paying off on the growth, and it's paying off on the margins as well. In term of the first question, do you want to... You have that one?
Yeah, yeah.
Go ahead.
Rory, on the headcount questions, I think you-- I know we've published the results relatively early on, so you may have not had time to go through everything. But you will see in our consolidated income statement that our personnel charges are relatively stable year-on-year. In terms of headcount, it translates into between 2% and 3% increase. And you will realize, I'm sure as well, that the external charges, which are more the contractors charges, are expanding. So, several areas of fast growth, we are using subcontractors as we used to do in many places. And usually the normal rhythm is when the growth is considered stable enough, geography by geography, then those contractors are replaced by on staff.
So we are typically in the usual cycle of accelerated growth, where we focus on gaining new clients. We were discussing volumes a few minutes ago. It's a highly volume-driven growth, and we manage to keep it from a cost point of view very flexible, because the bulk of the growth of the additional volume of growth is delivered through contractors. Again, we could go in many details because it's not everywhere the case, but again, looking at the P&L point of view, that's very transparent.
Yeah. And I think, Rory, the other point one to make on headcount is our performance programs look at aspects of utilization and efficiency, right? So, that is important for us as we ramp up growth and as our growth is volumes led at this point. I hope that answers your question.
Yeah, that's been really helpful. Thank you both very much.
Thank you.
We will take the next question from line, Arnaud Palliez from CIC Market Solutions. The line is open now, please go ahead.
Yes, thank you. Good evening. I just have one remaining question. Can you be a bit more specific about the very strong growth you had in Middle East and Africa? Is it explained by from the big big CapEx project in oil and gas or commodities, or is it more a day-to-day business?
So look, the Middle East and Africa market is a resource play, right? It's energy-driven business. Oil and gas remains a major activity for us there, and it's growing double digits. It's a super cycle in the oil and gas, no secret there. We're very well positioned. We have very long track record in the region. We have a very good capabilities on the ground and technical centers and very strong brand name with our customers. So that's contributing to very strong double-digit growth in there. And the other thing we have been doing here in the Middle East is to diversify from the oil and gas, and we have been building a good position in the B&I sector.
We talked many times about our projects throughout Saudi Arabia in particular. The NEOM project is the flagship one, and there again, we are growing. We're also seeing growth actually in terms of certification, and we are also growing in some of the lab testing activities as well. So all in all, very strong performance, and the mix, of course, is a bit different between the Middle East proper and the rest of Africa. But that directionally, that's the kind of dynamic you have there.
Okay, thank you.
Thank you.
Thank you. We will take the next question from line, Himanshu Agarwal from Bank of America. The line is open now, please go ahead.
Hi, good afternoon. Thanks for taking my questions.
Hi, Himanshu.
I've got two, please. The first one is on the organic growth guidance. At the beginning of the year, when you gave us the organic growth guidance, H2 greater than H1, the argument was, the H2 comps are easier and hence we should expect a slightly better organic growth. Now, H1 has clearly surprised positively and it has been quite strong. Why don't we expect that momentum to continue into second half and expect higher growth in the second half versus first half? That's the first one. And second one, on the U.S. elections. If we go by the polls and assume Mr. Trump wins the election, given his policies around trade and tariffs, can you discuss the potential impact on the testing business overall?
Maybe if you want, you can probably discuss the impact you saw last time during his tenure from 2017 to 2021. Thank you.
Yes, thank you. Thank you. Look, on the guidance, we, you know, we had a good performance in H1, above what we have expected initially, driven by our certification activities, our Consumer activities. We also had a robust activity in the Industry. Looking at H2, we consider that we will be in line with what we are seeing in H1, and we believe that upgrading our guidance to high single digits is a good step for us. We like to be reliable in our predictions. We looked at our risks and the opportunities, and on balance, this makes sense to us at this point.
Now, for the great question, the second one on the tariffs, it's a really important question, and it's something we look at. This is not while there is the trigger of a new administration. Reality is, it's an aspect we look at all the time, and we talked about it in the past. We know that there is a movement of supply chains, and those movements are done for two reasons.
One, is there is a de-risking of, I would say, eastern production platforms, particularly China. And then the second one now is the risk of tariffs and the likelihood, actually more the likelihood is there, is the severity that of how bad these tariffs are going to be, which means that a lot of the o rganizations, the buyers and the producers, have been actually thinking about this de-risking of these both events, and we have seen movements over time.
So for us, it's not new, and that's why our diversification strategy is very clear. It intends to diversify geographically. Mostly, it allows us to de-risk the China element. And that diversification is also sectoral, and that's why we made some acquisitions on the healthcare and beauty side of things, and also in upstream services, something new to us, and of course, on services, and we're looking very closely on all aspects of sustainability. So we're very clear this will take place for one reason or the other. The tariffs might accelerate the move.
In fact, today, if you look at Mexico, it is overtaking China as the major trading partner of the U.S., and there is a production base that is moving there, and that's why in December, we actually completed the acquisition of a technology company there in Mexico. I would say Central America becomes extremely important for us to de-risk this phenomenon. So something to continue to watch, and certainly we are working on mitigating it.
Thank you.
Thank you.
Thank you. We will take the next question from line, James Rose from Barclays. The line is open now, please go ahead.
Hi there, thank you. I've got two , please. The first is on margins and a bit more broader picture. So if we think we've got 29 basis points of organic margin increase from 9% organic, with a lot of that coming from, say, Consumer, Marine, and Certification, are you happy with that? Are you satisfied with that, or would you have hoped that it would have dropped through a bit more? Is there anything sort of holding it back, that margin coming through a bit more? And then secondly, is on net financial expense stepping up. I noticed there's an other line of EUR 12.8 million, which is a lot higher year-on-year. Could you help us understand what that is?
Perhaps, give us an idea of what to model for the full year on net financial expense? Thank you.
All right. Thank you, James, for the questions. I'll let François cover the second one. Look, as I mentioned, I think there was an earlier question on the margin. For us, it's we are pursuing margin improvements. We're very clear when we initiated and launched the strategy. There is a dynamic around performance programs. Some are more established than others and are new and require investment, and we will continue to invest. We have a vision of really evolving our ways of working, and that requires investment. So of course, in the longer term, we want to continue to increment, to continuously improve the margins. That's our commitment, and we will deliver on that, but we have to enable that.
And that's really the way we're guiding our margin efforts. But, let's be very clear, performance-driven approach to the business is very clear in the organization, and that performance is very granular the way we look at it today. François, you wanna take the second one?
Yes. So on the financial cost, so I've said it rapidly, but just to go into more detail. Two things in there. You have the net financial costs, which are the usual cost of a debt minus the interest we get from more excess cash being positioned in some accounts. This hasn't changed at all. The only change compared to H1 last year is the impact of revaluation of balance sheet due to foreign exchange. There is a bit of seasonality, H1, H2. So to make it simple perhaps for you, basically, we expect our financial cost on a full year basis to be very close to the one of last year. So I hope it helps you model this properly.
It does. Thank you. Very clear.
Thank you.
Thank you. We will take the next question from the line of Karl Green from Berenberg. The line is open now, please go ahead.
Good evening, Karl Green today from Berenberg. Just three from me, please. Would you be able to give us an idea of how much of the 18.2% organic growth in Industry was FX-induced pricing, please? Because I note that FX was -14%, so it's a big number there. Second question is, it's probably fair to say that leverage has been pretty low now for a number of quarters. Could you perhaps comment on the possibility of what you plan to do with that headroom in the short term? You know, perhaps another share buyback or, or anything else, please. And the last question, you know, read a fair bit of news recently around the NEOM project being reined in quite substantially in the longer term.
So just wondering how impactful that will be for you, if possible, please, and, and that's it. Thank you.
Yeah. Thank you, Karl, for the questions. I'll take questions two and three, and then I'll let François take question one. Look, on the leverage, as I mentioned earlier, for responding to a question on the pipeline, we are executing an accelerated program of M&A, but again, with the discipline I mentioned earlier. So we are working on multiple fronts, and we want to have the flexibility within our finances to execute these programs and to be opportunistic. So the share buyback is one of the tools that is in our toolbox that we will use when the time is right. At this point, we are focused on ensuring that we execute our M&A pipeline program.
As we mentioned in our guidance, in the strategy, we will be keeping our leverage between one and two, and that's not on the lower end, it's all the way. So, there is no... I guess we're not going to sit on that leverage on the lower end, is the point. On the NEOM, the NEOM project is going to go through phases. It's been a huge project to start with, and it's true, it is being restricted. Not impactful at group level at this point. It's a great benchmark for us in the Kingdom. It allows us to work very closely with one of the most iconic projects. Saudi Arabia is growing very healthily for us.
It's an area we are focusing on, so it's a rather positive story, and we will continue to grow there and invest in the country. So NEOM is actually a good springboard for us for that. François, you wanna cover the Industry point?
The Industry?
Yeah.
So Industry seven, 17%, 18% organic growth. Here, I think coming back to what Hinda mentioned in our introduction, three elements to keep in mind: strong growth, the oil and gas segment of the Industry division. Strong growth into the renewable driven by a lot of new projects. One element we haven't discussed, but you may remember from previous call, Industry as well, this is where we've decided summer last year to discontinue several large contract, which we are not having the level of margin that we were pleased with. So the combination of those three things, so two very strong organic growth, contract discontinuation, bring us to this 17%. A chunk of it is done in geographies where I think FX is not very favorable.
Again, I've mentioned here, we have Canada, we have Australia, we have a few countries in Latin America, we have China. So what we could expect for second half, most probably the FX component will reduce, while the organic growth component will be maintained. So, you know, net of everything, we would, we will have a, an even better profile over H2.
That's very helpful. Thank you both.
Thank you.
Thank you. We will take the next question from line, Arthur Truslove from Citi. The line is open now, please go ahead.
Thank you very much for taking my question, and really good set of results today, and well done. First question from me, so just going back to Rory's question on Consumer Products. So, you delivered an organic margin uptick of 134 basis points. I just wondered you know, how much of that you can sort of put down to operational leverage on strong growth, on, in particular, the Soft lines, Hard lines, and, and, and toys? Second question, as we look to the second half, obviously, you've done very strong organic growth in the first half, but can you just tell us, you know, which divisions you expect the growth rates to be markedly different to what you saw in the first half, if indeed any?
And then, third question, you mentioned that you were gonna do a disposal in Buildings and Infrastructure. You may already have mentioned it, but I wasn't sure if that had already gone through or whether it you would, you hadn't signed it yet. So I just wondered if you could confirm that. Thank you very much indeed.
Yeah, thank you. So on the disposal, yes, that, that has been completed. It's not... It, it will, it will reflect in the second half of the year, but that was completed at the end of June. So that's, that's done. On the growth rate, we, we don't guide by division, but I think it's fair to say that I, I expect that our activity around certification, around, around, Marine and Offshore, and, and B&I will continue to, to be buoyant. We will also expect that, some of our activity around the, the, the, commodity, sorry. The commodities is, is also will, will remain robust.
I don't really foresee major disruptions, and as I said, our H2 is broadly in line with our H1, but I wanted to highlight the strength in these particular segments. On the CPS question, specifically on the details of that, do you wanna cover that?
Yeah, sure. So after on the CPS one, to refresh perhaps everyone's memory, you know, during the period that was a bit more difficult, meaning H2, let me think, was like May, mainly last year. We've conducted in H2, some restructuring, in terms of, overheads, in terms of lab rationalization. So this has been, you know, now fully delivered, and, you know, if you want to take a bit of a rule of thumb, the, operational leverage, the pure operational leverage, is two-third of the performance. One, so meaning, getting more view volume and, and, and so the growth, it will bring two-third of the performance at the bottom.
And one-third comes from the measures we took end of last year to prepare this rebound and ensure we are back on margin levels that are more historical level. One should not remember that this activity went down last year quite heavily, so we are on a recovery mode, I think, which is solid on the top line. Margin, we are, you know, getting the fruit of the work done, but two-thirds top line, one-third from our previous restructuring programs.
That's very helpful. Thank you very much.
All right, thank you.
Thank you. There's no further question at this time. I will hand it back over to you host for closing remarks.
All right. Thank you very much, Caroline. Thank you, everyone, for your questions and have a good day. Good evening. Bye-bye.
Thank you to this call. You may now disconnect.